Predictions that online media would spell the death of print have proved unfounded. The web's influence continues to grow but print is learning the art of re-invention. Words by Tony Glover.
"The rumours of my death have been greatly exaggerated," American writer Mark Twain once famously remarked, denying widespread reports of his demise. Britain's print media could say the same. According to half a dozen of the City's leading media gurus, predictions that the internet will kill newspapers and magazines are premature. Smarter publishers have learnt the art of co-existence and the world wide web is not about to write their epitaphs.
"People like to be harbingers of doom," says Fraser Davidson, August Equity investment director. "The demise of newspapers and magazines was predicted when television came along and before that when people first started listening to the news on the radio." "People need something they can read on the train, on the sofa and in bed," agrees August Equity managing director Andrew Hartley.
Publishers believe that print has some very real advantages over screen-based media. The user does not need to be in range of any kind of wireless network in order to open a newspaper or magazine. Nor is battery life an issue. Paper is remarkably "robust" in IT parlance. Drop a newspaper or magazine on the floor and it will not break. Paper does not catch viruses or suddenly crash, leaving the viewer staring at a blank screen.
According to Sir David Arculus, chairman of Boat International and former chairman of IPC Media, magazines, especially, offer many advantages over web-based publications. "The vendors of luxury yachts, for example, prefer to advertise in glossy magazines where the photographs do the boats justice," says Arculus. "I firmly believe that if electronic media had been invented first and magazines had only just been conceived everyone would be raving about how fantastic magazines are."
But there is no room for complacency - Arculus concedes that some areas of traditional publishing, such as women's magazines, are suffering a loss of revenue as advertisers migrate a growing proportion of their spend to the internet. "One of the lessons they are learning is that you cannot simply take magazine content and put it online. But you can use the technology to add something," he continues, adding that the internet presents traditional publishers with an opportunity to generate additional revenues from sources such as online classified advertising. "The internet is a complimentary channel to magazines. The magazine is your calling card and the internet enables you to put other things around the magazine."
LongAcre Partners director Toby Ramsden agrees. "At least ten per cent of advertising spending now goes to the internet - up from virtually nothing a decade ago," he says. "The threat is that online rivals will take both advertising revenues and readers from traditional media." Print companies are now being valued at far more conservative price-to-earnings multiples than their internet-based rivals. "Advertising markets have been hard of late and this has had a significantly heavy impact on ratings," says Davidson. "Internet businesses are lean and mean with lower overheads. It is cheaper to publish online and the internet still has great growth potential."
"The online media sector is experiencing higher-thanexpected growth rates compared to traditional media as consumers spend more time online - and this is reflected in valuations," says Nick Harvey, managing director of Ingenious Media. "The UK online advertising market grew to £2 billion in 2006 and as advertising revenues follow the audience, this is expected to continue to grow at over 30 per cent per annum. Online businesses tend to be highly scalable and this is another important factor."
Ramsden warns that the challenge from web-based media will intensify because of the widespread adoption of broadband internet. He believes a key challenge for print-based media companies is to decide how best to leverage their brand to create customer loyalty online in an era where video will become increasingly dominant for screen-based media. Some print-based media companies are already tackling this issue and incorporating video into their online offerings. Boat International, for example, is planning to film the America's Cup, the world's most famous yacht race, this year. Online subscribers will be able to view the race itself, something that is simply not possible in the world of print.
But the internet also offers traditional media an opportunity to deepen its relationship with subscribers. Aside from its ability to offer audio and video, as well as text and photographs, the biggest difference is the richness of the medium's content. "The most important factor is that the online user can interface with the new media," says Hartley. "If you buy a magazine, the publisher has no idea who you are. But if you visit a website then the publisher can gather far more information about you and, as a result, make your experience bespoke." This will become an increasingly important factor for advertisers, who will be able to target niche markets. Microsoft has already developed software that enables advertisers to track the age and sex of people clicking on specific advertisements.
David Elms, corporate finance partner at KPMG, believes the key to success is to identify and address a key customer need: "It is important to know your audience and identify the effectiveness of advertising." He cites the Guardian Media Group, through Guardian Online, and Daily Mail General Trust, through Associated Northcliffe Digital, as examples of it working. According to Harvey, one area where traditional print titles have successfully exploited the dynamics of digital distribution is business and professional publishing.
"Companies such as Incisive Media, United Business Media and Reed Elsevier, for example, are managing to migrate a significant proportion of their product to digital distribution models to consolidate their market position," he says. But Elms believes that while the internet offers opportunities for additional growth, it does not constitute the threat to traditional media that many spectators believe. "Over time," he says, "it is likely that perceptions of the current and future scale of the move from traditional print media to the internet will be seen to have been exaggerated.
Download a complete copy of this issue (where available):
